HMO regulations proving to be a stumbling block for landlords

Posted on 5th May 2011

With the changes to local housing allowance just four weeks old, the impact it has had on landlords and tenants is still hard to determine, but there is no doubt that changes have caught some landlords checking their property insurance policies as they wonder whether they will soon be experiencing void periods in their properties.

Caps on benefits well documented

The changes in the rules regarding the limits those on housing benefit can claim in housing allowance should by now be common knowledge to landlords with a vested interest. They are £400 a week for a four bedroomed property, £340 a week for a three bedroomed property, £290 a week for a two bedroomed property and £250 a week for a one bedroomed property. In addition to this rental charges will be now set by the 30th percentile rather than the median level. These rules apply to any contracts signed by tenant and landlord after April the 1st 2011, and existing tenants nine months after their anniversary contract renewal date.

Food for thought

One incentive landlords have received to lower their rental demands to encompass the new rules is that they will receive their rent direct from the local authority and not from the tenant if they do bring their rents down. This has long been the aim for landlords concerned about rental arrears and will no doubt prove a tempting carrot for some. It has not gone unnoticed by local authorities either and many more are beginning to offer this option. However, landlords should note that this is a transitional arrangement at the moment and will only last two years.

Young tenants on the move

The big concern for professional landlords with student property insurance is the situation with Homes of Multiple Occupation (HMO). The new housing benefit rules mean that single renters under the age of 35 will now only qualify for shared room accommodation benefit, a significant drop from the allowance on a one bedroomed flat. The result will probably drive more young people to look for accommodation in HMOs but just as this situation develops many towns and cities with student populations are prohibiting buildings being used as HMOs under the controversial article 4.

It is this part of the new system that could create most problems. Some experts predict up to 80,000 young people will be forced out of their present home due to lack of funds, while landlords wanting to offer accommodation to them may be thwarted by local authority guidelines.